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Facing the financial crisis

Seventy-three percent of Americans identified money as the No. 1 factor contributing to his or her stress levels, according to a survey by the American Psychological Association.

With the recent presidential election and tumultuous stock market, financial security is at the forefront of many seniors' minds. Young and old, people are wondering if their nest eggs are safe, how and where to invest money, and when the "right time" is to retire.

Pamela Caldero, a Sequim financial advisor and certified estate planner, has advice to help put Sequim residents at ease.

"With 20 years in the industry, I have never experienced a situation like we are in now," Caldero said, describing the economy as having "a combination of no real support or infrastructure in the stock market and a real estate market I don't believe we've seen the bottom of," not to mention the issues of national debt, global currency, and the war on terrorism.

"I'm personally looking at my clients portfolios very differently than I have in the past," Caldero continued. "I look at what their needs are in the next 3-5 years and 5-10 years and then re-position their portfolios to accommodate their needs."

Caldero advises people 30 and younger with money invested in the stock market to "stay in it for the long haul" and not make any drastic changes such as transferring all their funds into a savings account. "Don't panic," she said. "Have a plan, talk to people and stay informed about what is happening."

But for individuals 40 and older, Caldero suggests a different plan of action. "I really think you should be looking at individual strategies," she advised, listing growth portfolios, IRAs, 401ks and brokerage investments as income-producing possibilities.

The safest investments are certificates of deposit and money market funds but there's a tradeoff: safe investments usually produce the lowest returns. Buying annuities may be an alternative for investors who are seeking to reduce their stock exposure and who want an income stream for life, according to the AARP Foundation.

Seniors 65 and older need to be the most careful, Caldero emphasized. "Drawing off a portfolio in a down time is the worst thing you can do," she said firmly. "The recovery time is longer."

For individuals two to three years away from retirement, Caldero's advice is simple. "Run to a financial advisor," she said. "Talk to a few people, ask about their credentials, background, how many clients they have and how they manage portfolios. Find somebody you are comfortable with."

Although Caldero cautions people against "timing the market" and making investments based on what's happening in the world, she said she doesn't see a reason for anybody to become paranoid about trusting financial institutions or start stashing money under bed mattresses.

"My personal philosophy is that I believe the government is not going to let anything happen that would be a sign of weakness to the public," she said. "I also believe that if we got into another Great Depression, that it wouldn't make any difference (where your money is) because our currency would become so devalued."

Surviving today's market

To guide Americans through challenging economic times AARP Financial has prepared the following tips:

• Don't make rash decisions - Recent events highlight the need to have a financial plan that you are able to follow regardless of market swings. As difficult as it may be, don't let your emotions drive your investment decisions. Reacting to every up and down in the market is not good for your health or for your financial portfolio.

• Revisit your reasons for investing - In volatile markets keeping a long-term time horizon can be very challenging. However, if your investment goals, time horizon and financial situation have not changed, your best course of action may be not to take action. Now is a good time to reassess your financial situation, but only make changes if needed.

• Establish an emergency fund - Keep at least six months of living expenses easily accessible in savings or money market fund accounts. This enables you meet unexpected financial obligations.

• Make saving automatic - The best way to get past volatile markets or tough economic times is to make investing automatic. Establish an automatic investing plan that makes investing a seamless process by regularly deducting a set amount from your paycheck or checking account and transferring it to a retirement savings account.

• Review fees and expenses - Take another look at the fees and expenses you are paying on your financial products and services. For mutual funds, review expense ratios; credit cards, scrutinize interest rates; and banking products, transaction charges. Switching to a lower cost product may ultimately save money.

• Resist impulse purchases - Think twice before making a discretionary spend. Avoid incurring debt on any impulse purchases regardless of the "deal" and instead put that money in a savings or investing account.

• Have a plan - It is never too late to put a retirement plan in place. Having a plan helps you determine whether you are on the right path to the financial future that you want. And in times like these a plan, not your emotions, should drive your investment decisions. So, if you do not have a retirement plan, now is a great opportunity to create one.

• Consult with an expert - Financial advisors are specially trained to help people manage their finances. If you work with a financial advisor, schedule an appointment to review your portfolio. Discuss your concerns and request an assessment of the performance of your holdings.

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